Bernanke’s Pursuit Of Happiness

Yesterday Bernanke, in a pre-recorded speech to a conference in Cambridge, MA, extolled the virtues of happiness economics.

Let’s be honest, there was little point in him singing the praises of his own area of economics, that’s fallen flat on its face.

Across the developed world the damages from the fiat money system become greater every day. Governments and central bankers are the ones to thank for widening levels of poverty and inequality. The majority of our daily lives are affected by decisions made for us drawn from economic studies and statistics. But now the most sacred thing to all of us – our happiness – is something the most powerful government on earth would like to get their hands on.

One of the many criticisms of happiness economics is that it is used to serve political gains only. Happiness is not really something which can be quantified – what you need to make you happy may be different from what I need to make me happy.

Focusing on our happiness, politicians ask us to remember that money is not everything. This is handy considering money is becoming increasingly useless day after day, central bank meeting after another and election after election.

This is not only a means of distracting us from the misery they’re creating ("what do you mean you have no food? According to this index, you’re happier than ever!") but also another way of monopolising our lives. After all, they already monopolise our money supply and then some.

When in Bhutan

Bhutan is the only country which currently measures its Gross National Happiness as opposed to the more popular Gross National or Domestic Product. In Bhutan they have taken their concern for their citizens’ happiness to whole new levels – television channels which feature violence such as wrestling or MTV are banned. Even plastic bags are banned.

In the Buddhist Kingdom unfortunately happiness is not all you need – poverty levels remain high (23.2% remain below the poverty line) as do "rowdiness" and drug problems.

Whilst we agree, money isn’t everything – it certainly helps to have enough to feed your family, keep them healthy and keep a roof over their heads.

The problem with economics

Economics is the youngest science/area of study of them all and we do not know enough about it to start using it to implement or manipulate any area of life. Economics evolved thanks to the discovery that there is a predictable nature and regularity to the way in which we interact. This evolved without any planning or organisation by anyone, no government, no central bank.

However, organizers like to organize rather than let us get on with our lives. And organizers like to use economics, with its ability to quantitate EVERYTHING to put their policies into action. And if it goes wrong? The minute they realize we’re not going about our lives and interactions in a way which they had predicted or planned then we are not behaving rationally. The central banker and other mainstream economists merely tell us that it is due to other variables such as oil prices, or a delayed reaction which is preventing successful policy implementation.

Economics is a study of the consequences of choice. However if those choices are already limited thanks to a preconceived idea from a political party or central bank initiative then the results of that study are flawed, and so will the ideas to come out of it.

Keynes (and yes, I am quoting him in a positive light) wrote in The General Theory of Employment, Interest, and Money:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.

Solutions

I suspect that generally citizens of both the US and the UK would argue that they live in free societies and are exempt from intellectual influences, yet here we are discussing policy makers on both sides of the pond wishing to monitor our happiness. What happens after monitoring and data gathering? Solutions.

Not long after the Conservative party came to power in the 2010 elections David Cameron took his place on the happiness podium. Similar to Bernanke, he found himself in a position of power, with all eyes looking to him for guidance and yet he had no clue as to what should be done.

According to one of Cameron’s strategy advisors some of the key determinants which make us unhappy are those which we have the least control, “These are things that as individuals we can’t determine, but we can determine as a society together, and that basically means government is in the game.”

The idea that scientific precision, through government, can somehow measure our happiness, and thereby decided whether or not we are happy "enough" is an illusory one.

What is an interesting point to make however is that in the US and the UK, two of the wealthiest nations on earth, the need to measure our happiness seems to have become necessary. This is after the governments have manipulated policy and money supply in order to give us all we could wish for – health, education and safety. It seems that after we are above a certain level of subsistence, additional income and material goods become negligible.

The pursuit of happiness

Humans, I think the majority of us would agree, strive for happiness.

If we are deemed too happy, or not happy enough then further government policies can be implemented to manipulate this. Hayek once wrote that no single scale of values can be imposed upon society. Individuals are free to set their own values according to what goals they achieve/bring them the most satisfaction and happiness.

Over 230 years ago, Adam Smith observed that no statesman is as good a judge of how an individual should apply his productive efforts than the individual himself.

Richard Ebeling wrote in a recent paper on this matter:

If, now, an activist happiness policy were to be implemented by the government along the lines its proponents suggest, this must entail a reduction in the diversity of plans. If some are made unhappy due to others in society having more or different things from themselves, then the range of actions through which individuals will be allowed to pursue happiness will have to be curtailed. If followed strictly this would have to include not only diminishing the amount of income that wealthier people will be permitted to retain after taxes. It would also require limiting the types of goods and services that are allowed to be offered on the market.

But why do we need to have our happiness assessed? Surely an element of unhappiness is a good thing for the economy?

When we see a friend with perhaps the latest car or ipod we may well envy them. We strive to afford what they can afford, or at least achieve a similar standard of living. This stimulates work, productivity and creativity. But according to the Happy Economists this just leads to further misery, we always want what we don’t have, always wanting never settling.

However, this isn’t necessarily true, we all know a number of people who have pulled out of the "rat-race" happy with what they have, regardless of what those on the next road have.

The problem is that we are treated as a "whole" in a society. Society is just a word for a number of interactions between individuals.

Individuals are those who make up those transactions, they should have the right to choose their level of happiness and what makes them happy, not have it decided for them.